Here's why you will have less money in your pay packet from next month...

Employers and their staff will be in for a surprise if they have forgotten about big rises on the way for auto-enrolment pension contributions.

Until now, the total minimum contribution has
been 2% of earnings - half of it paid by the company and the other half by the
worker.

But in less than a month - from April 6 to be
exact - the total figure more than doubles to 5%, with the
employer contribution rising to 2% and staff putting in 3%.

Then, from April next year, the level of
employer contributions reaches 3% and staff contributions go up to 5% - giving
a total of 8%.

New analysis from Aviva shows that these changes
to workplace pensions could see the average earner add tens of thousands
of pounds more to their financial pot at retirement.

The financial services company says 9.3million
more employees have been introduced to saving for their retirement after being
automatically enrolled into a workplace pension scheme since 2012.

Aviva’s data highlights that, thanks to rising
contribution rates in 2018, an employee earning the UK average salary of
£26,572 per annum could add £840 to their savings pot across 2018 - up
from £600 in 2017.

Based on current contribution levels, an
employee earning the average UK salary, who began saving into a workplace
pension when auto-enrolment started in October 2012, could have a total of
£30,000 in their pension fund at retirement.

Boost

However, with increased minimum contributions of
5% from next month onwards, they could benefit from a £36,000 boost - more
than doubling their total pension fund to £66,000 when they retire.

And, with minimum contributions rising
again next April to 8%, the same saver would have £101,000 at retirement -
representing an additional £35,000 in their pension pot and more than triple
the amount they would have under current contribution levels.

Andy Curran, of Aviva, said: “Saving via a
workplace pension is one of the rare times in life when doing nothing
pays.

"Simply by remaining in their workplace
pension scheme, savers can benefit from their employers topping up their
savings and receive the added peace of mind that comes from knowing they are
contributing to their long-term financial health.

"While the changes mean employees will also
need to increase contributions from their own pay packet, making a small
sacrifice now can add up to a big difference when it comes to retirement.

“Auto-enrolment has been an incredible force for
good since its introduction in 2012, with more people than ever before now
contributing on a monthly basis towards their retirement.

"It is vital the latest milestone is used
as a basis on which to build further momentum around the need for people to
save for retirement. If as a society we are to avoid a retirement savings
crunch further down the line, we must go further still in the years to
come.”

Personal financial planning

If you are planning your financial future, Aberdein Considine can offer you the support of some of Scotland's most talented and respected independent financial advisers.

Whether you want to buy a property, secure an income for retirement, pay for your children's education, provide for dependents or pass your estate to your family, we can provide you with a high-quality service which is tailored to your lifestyle.

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